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A Mixed Bag for Cable MSOs

The recently concluded fourth quarter of 2013 has turned out to be mixed for the two largest cable TV operators in the U.S.

Comcast Corp. (NASD:CMCSA), the largest cable TV operator, has surprised the market with the claim of modest growth in its video subscriber base in the fourth quarter of last year. Notably, the segment has seen growth after six years. In the year-ago quarter, Comcast lost 7,000 video subscribers.

On the other hand, Time Warner Cable Inc. (NYSE:TWC), the second largest cable TV operator, lost 215,000 video subscribers in the fourth quarter of 2013. In the year-ago quarter, the company lost 129,000 video subscribers. For full-year 2013, Time Warner cable lost a massive 825,000 video customers compared with a loss of 530,000 customers in 2012. Clearly, video operation has become a major concern for the company.

Meanwhile, the cable TV industry in the U.S., is on the verge of consolidation. 2014 may witness several game changing decisions and activities in this industry.

Currently, Charter Communications Inc. (NASD:CHTR), the fourth largest cable TV operator, is aggressively pursuing its bid to acquire Time Warner Cable. Industry sources revealed that Comcast and Cox Communications are also in the fray for the company.

In the U.S., the cable MSOs (multi service operators) are gradually losing hold in the pay-TV market globally. Internal dynamics of the pay-TV market is slowly shifting toward fiber-based video offerings of large telecom and satellite TV operators.

In addition, low-cost online video streaming service providers such as Netflix Inc. (NASD:NFLX) have become major competitive threats. Video offering is the core business area of cable TV operators, which is slipping out of their hands.

Currently, Netflix sports a Zacks Rank #1 (Strong Buy), while both Comcast and Time Warner cable have a Zacks Rank #2 (Buy) and Charter Communications has a Zacks Rank #3 (Hold).